Mortgage Lenders Raise Level of Risk

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Credit scores on closed home loans have moved lower for five consecutive months. At the same time, debt-to-income ratios stand at their highest level since early last year.

During October, 64 percent of closed loans were conventional mortgages, and 23 percent of the mortgages funded were insured by the Federal Housing Administration.

In addition, nine percent of mortgages funded last month were guaranteed by the Department of Veterans Affairs, while the remaining four percent were classified as “other.”

The statistics were reported by Ellie Mae Inc. in its Origination Insight Report October 2015.

Pleasanton, California-based Ellie, a Mortgage Daily advertiser, culled the data from a sampling of loan applications that flowed through its Encompass mortgage management software and Ellie Mae Network.

There was no change from September in the respective market shares.

The average home loan took 46 days to close in October, no different than in the prior month. But turnaround was six days slower than a year earlier.

“It is still too early to see if there will be impacts stemming from the Know Before You Owe changes that went into effect just last month,” Ellie Mae President and Chief Executive Officer Jonathan Corr said in an accompanying announcement.

Corr added that this month’s closing times might start to lengthen
as the new Closing Disclosures are implemented.

Refinances took 45 days to close last month, and purchase financing turn times were 46 days.

Conventional mortgage days to close amounted to 45 during the most-recent month, while FHA-insured loans took 47 days and VA-guaranteed turnaround was 48 days.

Out of all loan applications started in the
previous 90-day cycle, 66.8 percent had closed as of October 2015. The closing rate was unchanged from the previous month but stronger than 59.4 percent in the year-earlier month.

On just refinances, last month’s closing rate was 60.3 percent, and the purchase closing rate was 71.1 percent.

The closing rate on conventional loans during October was 66.3 percent. It dropped to 62.1 percent on FHA-insured mortgages and 61.1 percent on VA-guaranteed loans.

The average FICO score came in at 722, down one point from September. Credit scores have fallen each month since May, when the average was 730, and stand at the lowest score since Ellie began reporting the data in August 2011.

In October 2014, FICO scores averaged 726.

On just conventional mortgages, credit scores averaged 726 on refinances and 754 on purchase-money loans.

FHA credit scores averaged 654 on refinances and 687 on purchase financing.

The average FICO score was 707 on VA refinances and 705 on VA purchase transactions

Ellie reported average loan-to-value ratios at 80 percent in October 2015, the same as a month earlier and off from 81 percent a year earlier.

Conventional LTV ratios averaged 69 percent on refinances and 80 percent on purchase financing.

LTV ratios on FHA refinances were 81 percent, and FHA purchase transactions had an average LTV ratio of 96 percent.

On VA mortgages, LTVs averaged 88 percent on refinance transactions and 98 percent on purchase financing.

The report said that last month’s average DTI ratio was 25/39 percent — the highest ratio since it was 25/39 percent in January 2014.

DTIs averaged 25/40 on conventional refinances and 25/34 percent on conventional purchase financing.

On FHA-insured mortgages, DTI ratios averaged 29/46 percent on refinance transactions and 28/41 percent on purchase financing.

Both types of VA transactions had an average DTI ratio of 24/40 percent.

Refinance share widened to 44 percent from 42 percent in September and 40 percent in October 2014.

Refinance share was 54 percent on conventional loans during October, while FHA refinance share was 22 percent and the share on VA mortgages was 29 percent.


Mortgage Daily Staff


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